Le radici del declino economico (The roots of Economic Decline)

Enrico Saltari, University of Rome La Sapienza. Italy
Giuseppe Travaglini, University of Urbino

Abstract

In this bookwe argue that the slowdown in labor productivity and not the low contribution of labor is at the root of the slowdown of the European economic growth in the decade 1995-2004. Using a simple dynamic model of the labor market, we show that the poor performance of the European economies can only be accounted for by a combination of two shocks: a negative supply shock to the labor demand due to the deceleration of technological progress and a positive supply shock resulting from the labor market reforms. We use a structural VAR model to estimate the contribution of these two shocks to the dynamics of employment and labor productivity.